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buying a home in nj, New Jersey real estate

Buying a Home in New Jersey When Rates are High

The trajectory of our lives does not always align perfectly with the housing market. If you are currently looking, you are undoubtedly aware that the national interest rate average is almost 7%. For those who NEED to buy a home right now, we have some tips to get a better deal.

On Behalf of Veitengruber Law | Nov 25,2022

It was a great time to purchase a home two years ago, but now? Not so much. Still, the trajectory of our lives does not always align perfectly with the housing market. Some people still need to navigate the New Jersey real estate market to purchase a home. If you are currently looking or soon will be, you are undoubtedly aware of the high-interest rates keeping most buyers away from the market. With the national interest rate average almost at 7%, many would-be homebuyers are being priced out of the market. That said, if you have to buy a home right now, we have some tips to get a better deal.

1.   Discuss a "Buy Down" with the Seller

High interest rates are slowing the market to the point that sellers have difficulty finding buyers. Homes are sitting on the market for much longer, which can be a sound bargaining chip for buyers. Recent real estate deals have seen the resurgence of a "buy down" option. This occurs when a motivated seller agrees to pay a certain percentage of interest for the first few years of their buyer's mortgage. For example, if your interest rate is 6.25%, the seller may agree to pay 2% for the first year and 1% for the second year. This would give you two years at a lower rate to either save up money OR refinance once interest rates are lower. This can be an attractive option for sellers, especially big homebuilders and large-scale land developers.

2.   Consider an Adjustable Rate Mortgage (ARM)

Typically, financial experts advise against adjustable rate mortgages (ARMs). However, with interest rates as high as they are, many experts suggest the only way rates can go is down. Lenders offer ARMs at a slightly lower interest rate than fixed-rate mortgages (FRMs). So, if you opt for an ARM over an FRM, you could get the best interest rate available now. An ARM can allow you to purchase a home at a more affordable rate. There is a good chance that your interest rate will drop in a year or so as the market evens out. You can always refinance later when interest rates are lower.

3.   Ask for Seller's Concessions

Sellers are struggling right now. It is hard to sell a home in a market with high interest rates. Many sellers will be motivated to agree to concessions to sell their home as quickly as possible. Strategize with your real estate agent about what kind of concessions will best fit your circumstances. Many buyers are asking for closing costs to be included in the home's sale price—and sellers are agreeing. This can save you upfront and allow you to put your savings towards monthly payments.

The real estate market in New Jersey and across the country has been fast-paced and tumultuous since the pandemic. As we approach a real estate slowdown, take your time to assess your finances and work towards the best deal you can get with an experienced local real estate team. As your real estate attorney, Veitengruber Law can help you achieve your real estate goals.

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